Senate panel displeased with hefty demurrage cost

ISLAMABAD: The Senate Standing Committee on Petroleum has expressed its displeasure over hefty demurrage payments made by Pakistan State Oil (PSO) over the past five years.

In a briefing to the committee on Thursday, PSO Managing Director Jahangir Ali Shah said demurrage cost as a percentage of imports made by the company rose to 0.48% in 2017-18 from 0.3% in 2013-14. He blamed the high cost on problems caused by congestion at two seaports of the country.

The committee chairman, however, highlighted that the demurrage paid by PSO had increased 10 times. “PSO’s demurrage charges surged to $20.4 million in 2017-18 from $2.5 million in 2013-14, which need to be curtailed,” he said.

The PSO MD said the company was in the process of enhancing its storage capacity at Keamari and linking Karachi Port with Port Qasim through a pipeline.

“PSO is also engaged in the development new storages across the country; the company is working to enhance the existing fuel storage capacity from 1 million tons to 1.27 million tons.”

He held the Oil and Gas Regulatory Authority (Ogra) responsible for the high demurrage cost, saying the regulator gave new licences to oil marketing companies (OMCs), but most of them had no storage capacity. This created hurdles in the way of PSO’s business, he said.

Contending the remarks, Ogra Chairperson Uzma Adil pointed out that the regulator issued licences to OMCs after meeting all pre-requisites, including the construction of storage capacity. She rejected the PSO MD’s statement, asking him to disclose the name of the OMC which had no storage capacity.

Committee chairman directed the Ministry of Energy (Petroleum Division) director general to look into the matter of OMCs’ storage capacity and report to the committee in two months. He also directed the Ogra chairperson to hold a special audit.

Earlier, Shah informed the committee that OMCs were importing petroleum products without adequate oil storage capacity and these companies had also no facility to transport goods quickly.

Consequently, oil remains stuck at ports for longer periods and PSO is forced to pay demurrages.

At ports, he said, PSO had a storage capacity of 60,000 tons and an additional capacity of 50,000 tons would be available shortly. Responding to a question, the PSO MD said demurrages were paid from the profit of the company and had not been collected from consumers.

Talking about implementation of the Senate committee’s recommendation on gas infrastructure development cess (GIDC), the committee was informed that a special panel had recommended reduction in the GIDC charged from compressed natural gas (CNG) filling stations, captive power plants and fertiliser companies.

(This news/article originally appeared in The Express Tribune on September 14th, 2018)